The Full Federal Court on Friday dismissed an appeal by Volkswagen AG against the penalties handed down earlier for making false representations about compliance with Australian diesel emissions standards.
In dismissing the appeal, the Full Court upheld the $125-million penalty imposed by the Federal Court, and held that the figure “was not excessive, let alone manifestly excessive”.
“[The amount of] $125-million is the highest penalty ever handed down for breaches of the Australian Consumer Law. It’s about five times the previous highest penalty, and that reflects just how egregious Volkswagen’s conduct was,” Rod Sims, Chair of the Australian Competition & Consumer Commission (ACCC) said.
“This record penalty increases the signal to large corporations that they could face massive [consequences] for misleading consumers about their products.”
VW asked for a penalty reduction to $75-million
Australia’s Federal Court imposed penalties of $125-million in December 2019. But VW appealed this decision, seeking orders that the Court instead impose the $75-million penalty amount which had been jointly put to the Court by Volkswagen and the ACCC.
The penalties relate to conduct covered by the previous Australian Consumer Law (ACL) regime, which specified a maximum penalty of $1.1-million per contravention.
Since then, however, legislative amendments have come into effect and the maximum penalty for each contravention of certain ACL provisions is now: The higher of $10 million; three times the profit or benefit obtained; or, if this cannot be determined, 10 percent of the company’s annual Australian sales turnover.
“Given the now much higher penalties available, any large company deceiving its customers as badly in the future is at risk of much higher [fines] than those delivered today,” Sims said.
Company admitted to making false representations
Volkswagen admitted to making false representations when seeking to import more than 57,000 diesel vehicles between 2011 and 2015, and when listing those vehicles on the Australian Government’s Green Vehicle Guide website.
The company did not disclose that the vehicles were fitted with two-mode software, which caused them to operate in one mode for the purposes of emissions testing and another when being driven normally. If tested in that second mode, the vehicles would have breached Australian emissions standards.
“Volkswagen misled consumers and regulators about whether the diesel vehicles complied with environmental standards. It deprived consumers, who may have deliberately sought to buy a low-emissions vehicle, of the ability to make an informed decision,” Sims noted in a statement.
“The ACCC was prepared to settle its proceedings against Volkswagen because it considered that the proposed penalty of $75-million was significant and appropriate in the circumstances, which included Volkswagen’s admission of liability. However, this is ultimately a decision for the Court to make.”